Only a Radical Overhaul of the System Can Reclaim Medicines for the Public Interest

Medicines price gouging caught the public’s attention last month when Turing Pharmaceuticals raised, overnight, the price of a 60-year-old anti-infective drug from $13.50 to $750 per pill. Although the ploy garnered unique public backlash, arbitrary price setting and extreme profiteering has become the industry rule rather than the exception.

Valeant Pharmaceuticals has been hiking prices of existing drugs for years, and new medicines prices have never been higher: Gilead’s $1,000-per-pill hepatitis C drug Sovaldi and Sanofi’s $11,000-per-month colon cancer drug Zaltrap both provoked outcry from patients and doctors alike. Financial markets, however, rejoiced.

Insufficient price controls, overreaching patent laws, and other permissive legal and policy frameworks allow drug companies to price their medicines as high as they can get away with—relentlessly pushing the boundaries of both decency and what patients, public health systems, and private insurers can afford. Novartis’s cancer drug Gleevec was launched in 2001 at $30,000 per year, but now sells for more than $100,000, though it costs a mere $159 to manufacture. Similarly, Pfizer arbitrarily raised the prices of 133 older drugs this past year.

While shocking for wealthy welfare states, the lack of affordable access to medicines has long been a reality for people living in low- and middle-income countries. This was most evident in the late 1990s, when new medicines turned the fatal HIV infection into a chronic and manageable disease. Priced at $10,000 per year, these treatments were unaffordable for millions of people dying in Africa, Asia, and Latin America. Inspiringly, health activists across the world publicly twisted the arms of drug companies and policymakers in the early 2000s, bringing down prices to less than $100 per year and enabling treatment for over 15 million people today.

But despite this impressive “patient rights before patent rights” victory, the way the world finances and rewards medical innovation is more problematic than ever. The oft-cited but unfounded justification for high prices is the need to recoup expensive and risky R&D, and to fund future innovation. Though drug companies won’t disclose development costs, we know they rely heavily on publicly funded research. We also know that companies spend more on marketing drugs than on R&D, and more recently also on buying back their own stocks to artificially keep share prices high.

But more critically, despite growing R&D spending, the industry is largely investing in “me-too innovation,” delivering drugs that have no added therapeutic value over existing treatments—over 70 percent of all newly marketed drugs—and there are no signs that true medical innovation is increasing.

Where there is innovation, R&D priorities align with profits rather than public health needs. In 2014, 41 percent of new drugs approved by the FDA targeted rare diseases, for which high prices and generous profit margins are guaranteed. This focus on profitability sidelines medical innovation to address millions of people’s health needs, such as emerging drug-resistant infections (including the superbugs that haunt even the best equipped Western hospitals) and many common diseases like tuberculosis, Chagas disease, or dengue fever.

The recent Ebola outbreak—killing over 11,000 people for lack of a vaccine or treatment, despite Ebola being a known health threat for many years—is a stark wake-up call. Our medical innovation paradigm is ill-suited to respond to priority health needs.

While public and private sectors bear collective responsibility for the current imbroglio, a radical policy overhaul is needed to reclaim a people- and health needs–driven medical innovation system. The successful fight for access to AIDS medicines has shown just how powerful public action can be to drive change.

The Open Society Foundations are supporting diverse networks of experts and activists to advance new ideas and solutions to transform medical innovation in the public interest. As Albert Einstein famously said, “We cannot solve our problems with the same thinking we used when we created them.”